Council creates foreclosure registry

In an attempt to combat neighborhood blight, the city of San Diego has created a database to track properties through the foreclosure process.

The Property Value Protection Ordinance (PVPO) forces lenders to register properties in the city’s new registry system, along with a point of contact in the event the property isn’t maintained or secured, while paying a $76 fee so the city can recapture the cost of maintaining and monitoring the database.

The registration process is triggered when the lender files a notice of default — the first step in the foreclosure process, filed when a borrower is in arrears of payment — and must be received within 10 days.

No new maintenance requirements are imposed on property owners above current law; the law’s focus is instead on tracking and monitoring residential properties within the foreclosure process and providing code enforcement with a responsible contact person in the event a property becomes problematic.

Lenders failing to pay the $76 registration fee are subject to a $100 fine per day, capped at $5,000 per year.

The ordinance, passed by the City Council on Tuesday on a 5-3 party-line vote, with Kevin Faulconer, Carl DeMaio and Lorie Zapf in opposition, has been working its way through the city’s legislative system for a year and was championed by Councilman David Alvarez after he became concerned with vacant properties in his district that were ignored by the banks that owned them.

He has positioned it as companion legislation to two other ordinances passed earlier this year; he’s called it “the third leg of the stool.”

The Abandoned Property Ordinance (APO) expanded the city’s definition of vacant properties to give code compliance more leeway in addressing public nuisances, and the Responsible Banking Ordinance (RBO) made banks seeking to handle city finances — though not those engaging in other activities, like bond issuance — provide the city with a biannual report of their investment activity in the city, especially in areas like small business loans in historically underserved neighborhoods.

A representative from Mayor Jerry Sanders’ office told the council that the mayor’s office opposed the ordinance.

“I understand the mayor’s office not really expressing support on this, but we did elect a new mayor last week, and there will be changes at City Hall,” said Alvarez, referring to Mayor-elect Bob Filner, the city’s first Democratic mayor in two decades.

Alvarez said it’s possible the city could see another wave of foreclosures in the near future, as the economic recovery remains tenuous.

“This is a way to protect us from the next wave,” he said.

The council’s Republican opposition to the ordinance argued the registry fee would be passed along to distressed borrowers who were often in the process of refinancing their mortgage, and that the city’s foreclosure problem was subsiding regardless.

Lorena Gonzalez, secretary-treasurer of the San Diego-Imperial Counties Labor Council, one of many neighborhood advocates speaking in favor of the measure, said the evidence in the 70-some other California cities that have imposed similar laws suggests the fines aren’t being passed along to borrowers.

DeMaio said the money spent to establish the registry would be better spent hiring two code compliance officers who would investigate and deal with the sorts of blight the foreclosure registry is trying to solve.

“The council took a major step with the (APO), and that just got passed this fall,” he said. “I do believe we have to look at how that’s working before we lunge into another ordinance on top of that.”

Zapf argued there’s no guarantee that the costs of setting up the new layer of city bureaucracy are recoverable through the fine process set up by the ordinance.

“I don’t want one dime coming out of the general fund,” she said. “If it’s fully cost-recoverable, then it better be fully cost-recoverable.”

She was concerned that banks either wouldn’t pay the fines, or that the costs associated with establishing the database wouldn’t be realized if the foreclosure crisis continues to diminish.

“I don’t have any proof in front of me showing me that there’s any proof that these banks actually are paying, or that there’s any other successful program." Zapf said. "I don’t have any information to go on really, that this is actually working, or that it’ll be cost-recoverable.”

The ordinance was also heavily supported by the Center on Policy Initiatives and the Alliance of Californians for Community Empowerment.

Representatives for the San Diego Association of Realtors spoke in opposition to the ordinance, but also worked with Alvarez's office to voice their concerns and succeeded in getting its implementation pushed back to 90 days.

Lorie Zapf

Scott Sherman

David Alvarez

Marti Emerald

Sept. 23, 2014 -- George Chamberlin speaks with San Diego Mayor Kevin Faulconer about the importance of the military on San Diego's economy at a presentation of the San Diego Military Advisory Council’s sixth annual Military Economic Impact Study.